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TMI Blog2018 (3) TMI 1896X X X X Extracts X X X X X X X X Extracts X X X X ..... y it were of charitable nature. No new fact has been brought on record to prove that during the year some different incidents had taken place as compared to the earlier year to change the nature of the activities. The letting out of SH,during the period when it was not required by the trust,was not considered a commercial activity in the earlier years.It is true that principles of res judicata are not applicable to the income tax proceedings. But,at the same time it is also true that principles of consistency have to be followed while deciding the tax matters We hold that the assessee is running music school and providing medical services and it is utilising SH for augmenting its funds. In these circumstances in our opinion, it cannot be held that the it is carrying out business activities and the charitable activities are by product, as alleged by the departmental authorities. What has to seen in such cases is a holistic view of the things and not a narrower view - Decided in favour of assessee. - S/Sh.Rajendra, Accountant Member and Amarjit Singh, Judicial Member Revenue by: Shri V. Rajguru-CIT-DR Assessee by: Shri Vijay Mehta/Govind Javeri Rajendra, AM Challenging the orders d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commercial activity colour of charitable activities. He analysed the objects of the assessee, as per Memorandum of Association dtd 23/12/2007, and held that most of the activities were of commercial nature,that it was having mixed objectives of which some were of charitable nature and others were of commercial nature.He further observed that it was engaged in the activities like giving hall on rent, conducting cultural activity in sabha and running music school and a medical centre, that the main activity was only to give hall on rental basis,that the claim of the assessee that commercial activities were allowable u/s.11(4A) of the Act was not borne out of the facts of the case, that it was trying to justify the commercial activities in the shoes of charitable activities, that as per the provisions of section 11(4A),the commercial activities should be incidental to the main activities of the trust, that in the case under consideration commercial activities were the main object and the charitable purposes were incidental to commercial activities. Finally, he held that main object of assessee-trust was to rent SH for commercial activities,that the major expenses were also related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects were of commercial nature, that main activity was letting out of hall for commercial activities,that the board of trustees had discretionary power to spend trust fund on various activities,that the proviso to section 2(15) was squarely applicable to the facts of the case under consideration,that the assessee was engaged in regular business of letting out its property, that the assessee was hit by proviso to section 2(15), that the assessee had claimed that giving the hall on rent was going on since long and that the department had allowed benefit of section 11 in the earlier years,that principles of res-judicata would not apply to legal issues. With regard to provisions of section 11(4A) of the Act,the FAA observed that the assessee was engaged in commercial activities, that the charitable activities were incidental to commercial activities, that the proviso to section 2(15)would over ride the provisions of section 11(4A) of the Act. 4.1.With regard to claim of depreciation, the FAA held that exemption u/s. 11 had been denied to the assessee,that no deduction for depreciation was available to it. Finally, the FAA dismissed the appeal filed by the assessee. 5.During the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused the material before us.We find that as per the predominant objects of the assessee,as per the memorandum of association(Pg. A1-A25 of the PB)are to impart education in music,dance,drama,culture and other fine arts,to provide medical relief,health services and yoga to general public,to establish medical centres/ hospitals for providing medical services(Claus 3),that DIT(E),Mumbai had withdrawn the registration granted to it,that the Tribunal reversed the order of the DIT,that the Hon ble Bombay High Court confirmed the order of the Tribunal.In our opinion,during the continua tion of registration,it is not permissible to the departmental authorities to challenge the charitable nature of the objects of a Trust.We would like to refer to the case of Ahmedabad Urban Development Authority(335 ITR 575)wherein the Hon ble Gujarat High Court has held as under: Section 12AA of the Income-tax Act, 1961, lays down the procedure for registration in relation to the conditions for applicability of sections 11 and 12 as provided in section 12A . Therefore, once the procedure is complete as pro-vided in sub-section (1) of section 12AA and a certificate is issued granting registration to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also being managed and administered by the assessee. The details of income and expenditure showed that the assessee had received donations of ₹ 36,88,634 and nursing school fees of ₹ 4,46,088. The assessee pointed out that this nursing training provided at the centre of the assessee at Panvel was free of cost. The charge was levied for the mess but accommodation and other facilities were free of cost and apart from community development programmes, which were undertaken to educate rural women, they were taught various skills and made aware of how to live honourably. The Tribunal found that this was not an activity which would fall within the proviso to section 2(15) . The Tribunal referred to two letters addressed by the trustees of the assessee-trust clarifying that in the past, such activities had been found to be incidental to the objects of the trust. Secondly, the donation received during the year had been utilised in the assessment year 2009-10 for achieving the object of the trust. However, the bank interest received was continued and, then, there was a deficit. It was in these circumstances that the argument was canvassed that the fees collected for trainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable nature. No new fact has been brought on record to prove that during the year some different incidents had taken place as compared to the earlier year to change the nature of the activities. The letting out of SH,during the period when it was not required by the trust,was not considered a commercial activity in the earlier years.It is true that principles of res judicata are not applicable to the income tax proceedings. But,at the same time it is also true that principles of consistency have to be followed while deciding the tax matters. In the case of International tractors Ltd.,the Hon ble Delhi High Court(397 ITR 696)has held that deductions allowed in the earlier assessment years should not be withdrawn unless the circumstances have changed. The Hon ble Allahabad High Court in the matter of Zazsons export Ltd.(397 ITR 400) has held as under: In order to maintain consistency, a view, which had been accepted in an earlier order ought not to be disturbed unless there was any material to justify the Department to take a different view of the matter. While deciding the appeal, the Hon ble Court had taken note of the proceedings of the earlier AY.s.As the rule of consistency ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e object of a general public utility. It is not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The expressions trade, commerce and business as occurring in the first proviso to section 2(15) must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purposes but are conducting some activities for a consideration or a fee. The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a chari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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